[Answered]Discuss various measures undertaken by the government to curb and control black money. To what extent have these measures been able to address the problem of black money in India.

Demand of the question

Introduction. Contextual introduction.

Body. Measures taken to curb and control black money. Their success and failure.

Conclusion. Way forward.

 Government’s white paper defines Black money as the aggregates of incomes which are taxable but not reported to the tax authorities either during generation or possession. The Government has taken several measures to effectively control and curb the prevalence of parallel economy and unaccounted transactions. Black money is posing serious challenge to the security of India.

Measures taken to curb and control black money:

  1. Income declaration scheme and Pradhan Mantri Garib Kalyan Yojana: An amnesty Scheme to encourage voluntary disclosure of black money and avoid prosecution after paying a fine of 50% on the undisclosed income. An additional 25% of the undisclosed income is invested in the scheme which can be refunded after four years, without any interest.
  2. Amendment to Benami properties transaction act: To provide with a wider definition to Benami properties and to provide with robust structural mechanism to deal with black money.
  3. Promoting Cashless Economy: So as to ensure better control over money flow in the economy and prevent the creation of black money.
  4. Special Investigation team under Justice Shah: To unearth the black money stacked in the country.
  5. Demonetisation: To bring out the black money or flush it out of the economy by making it redundant.
  6. Transparency in political funding: By limiting the anonymous cash donations to Rs 2000 and introduction electoral bonds to prevent entry of black money in politics.
  7. Legislation: Enactment of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 to more effectively tackle the cases involving black money stashed abroad.
  8. International Cooperation: India joined a group of 48 countries as early adopters to new global standards for automatically exchanging information from 2017. India-Mauritius and India-Singapore tax treaties amended to adopt source based taxation of capital gains with a view to help curb tax evasion and tax avoidance.
  9. Project Insight: To curb the circulation of black money.

Success of such efforts:  The government has already taken various steps to finish the issue of black money. Such efforts have met some success in the form of increased tax compliance and unearthing of some black money.

  1. The biggest and the most recent step taken by the government was demonetization. Demonetization has helped to eliminate black money but only to some extent.
  2. The Income Tax Department has been successful in seizing assets of worth Rs.900 crore, after the admission of undisclosed income of Rs. 7,961 crores during 2016-2017.
  3. 17.73 lakhs suspicious cases (No. of PANs) identified involving Rs. 3.68 lakh crore in 23.22 lakh bank accounts under operation ‘clean money’.
  4. 21000 persons disclosed Rs. 4,900 crore under the Prime Minister Garib Kalyan Yojana (PMGKY) on which Rs. 2,451 crore was collected as tax.

Failures of the efforts: The black money menace is still untamed and lot more needs to be done to tackle it.

  1. The Compliance scheme under Black Money Law turned out to be a non-starter. The total disclosures under the scheme were an underwhelming Rs 3,770 crore.
  2. In 1997 the amnesty scheme for black money holders got declarations of around Rs 33,000 crore and taxes collected amounted to more than Rs 10,000 crore. Even half of it is not achieved.
  3. The lack of immunity from prosecution is a big negative in the law, discouraged many to come clean on their unaccounted wealth.
  4. Tax havens like Mauritius, Malta, Bahamas and the Cayman islands still operate in non-transparent ways though the G-20 is bringing a new regime to share information on real time transfer of money between countries and tax havens.

Way Forward:

Some of the strengthening steps that can be taken are:

  1. Setting up and strengthening institutions dealing with illicit money like Directorate of Criminal Investigation Cell for Exchange of Information, Tax Research and Investigation Division of the CBDT is needed.
  2. More technological advancement and an Integrated Taxpayer Data Management System (ITDMS) for 360- degree profiling is needed, so as to recognise the defaulters.
  3. Imparting skills to personnel for effective action is important. Both domestic and international training pertaining to the concerned area must be given. For instance, the Financial Intelligence Unit-India makes proactive efforts to regularly upgrade the skills of its employees by providing them opportunities for training on anti-money laundering, terrorist financing, and related economic issues.

Thus, a holistic and all round attack from within and outside the country is the need of the hour. India should quickly take up appropriate reforms at home that will aid in curbing the black money generation and circulation in the country along with the use of bilateral and multilateral mechanisms to deal with round tripping and stashing of money outside the country.

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